The rules around new digital tax reporting requirements will be relaxed for charities and other not-for-profit entities, it has been revealed.

The new system – known as Making Tax Digital (MTD) – requires almost all organisations to keep their VAT records digitally and submit their VAT returns using MTD-compatible software.

However, experts have raised concerns that charity staff – many of whom only work on a volunteer basis – were not able to meet the “strict digital record keeping requirements”.

In an attempt to meet charities halfway, HM Revenue & Customs (HMRC) has now relaxed the rules around recording VAT at charity fundraising events.

In a new VAT notice, HMRC said it no longer expects charities to record separate invoices for every different VAT-chargeable item supplied at a charity fundraising event, highlighting that “charities may find it difficult to meet the strict digital record keeping requirements for events run by volunteers”.

Charities and not-for-profit organisations, therefore, can record digitally all supplies made relating to the event as if it were a single invoice, and all supplies received can be treated similarly.

Note, however, that this easement only varies the requirements on maintaining records using functional compatible software, and does not change any other record keeping requirements as per VAT legislation.

Commenting on the update, tax expert John Hemming, chair of the Charity Tax Group (CTG), said HMRC’s latest changes should make record-keeping for charity fundraising events “less onerous”.

“Often these events are run by volunteers and with limited internet/computer access, making it impractical to maintain digital links between the individual supplies made,” he said.

“HMRC had not considered these types of situation, but officials have listened and responded in a pragmatic way, allowing special treatment for charities in these circumstances.”

Mr Hemming added: “This relaxation of the digital links requirements should make record-keeping for charity fundraising events less onerous for charities and the Charity Tax Group will continue to work with HMRC to ensure that the wider digital links requirements are implemented in a practical and proportionate way.”

For help and advice complying with new Making Tax Digital legislation, please get in touch with our expert team.

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About our Charities team

About our Charities team

With Mark Sharpley, UK200Group specialist legal sector member, and fellow partners Steve Bramall and Luke Taylor at the helm of an experienced team of charity finance specialists, Smailes Goldie is well positioned to offer advice to the charity and not-for-profit sector. We understand that charities are now facing a more challenging environment than ever before, so it is essential to have a team of accountants who understand the fast changing nature of this sector, which has more regulatory and compliance requirements than most. If you feel that you need advice on any of the issues discussed in this e-bulletin, Smailes Goldie are here to help.

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